Decoding app monetization with Google AdMob

World over iOS and Android app publishers earned over 89 billion dollars in 2016 as revenue from their app, which includes paid apps, in-app purchases (IAP), and of course ad revenueET CONTRIBUTORS | February 18, 2017, 13:30 IST

(Thinkstock Images)There has never been a better time to be an app developer in India. According to reports referenced in the Economic Times, app downloads on Google Play from India grew from 3.5 billion downloads in 2015 to 6.2 billion downloads in 2016. Based on this report, India now holds the top spot in the world for apps downloaded on Google Play, even outranking the US and Brazil.

As noted in a recent article by Quartz India, nearly 90% of India's over 220 million smartphone users have Android smartphones, so the about 6 billion app download figures comes as no surprise. However, from a revenue perspective, the Times of India reported that India is far behind and does not feature as one of the top ten markets. (According to Android Authority Japan, US, and South Korea rank highest)

World over, an article in MarketWire states that iOS and Android app publishers earned over 89 billion dollars in 2016 as revenue from their app, which includes paid apps, in-app purchases (IAP), and of course ad revenue.

Indian app developers are in need of proven app monetization techniques. When exploring revenue generation opportunities by deploying Google's in-app advertising suite, AdMob is a great starting point.

Here's how:

Don't be shy or scared of using in-app ads

In my interaction with many startups and app developers, there is a disturbing insight I have discovered. Many developers think using in-app ads are a clichéd way of generating revenue, and that they must come up with a unique and novel way of making money.

Nope, it is not necessary to reinvent the wheel. Ad supported businesses have been thriving for decades. Besides being a source of income for a publisher, advertising subsidizes the price of a product for consumers. For example, if not for ads in a local newspaper, we may have to pay 10x or more than its current selling price. The concept of freemium apps may never have picked up as well.

Many of the largest and most recognizable apps use advertising to support their business model. Rather than reinventing their revenue models, they constantly innovate to maximize the ad revenue. From major sporting events to longstanding publishing houses to new age tech-based content providers, every one of them smartly leverages the power of monetizing the massive eyeballs they receive by showing ads, without disrupting the user experience.

An app or game is no different than our above examples. These apps and games can generate money through ads if they can garner users at scale and engage them frequently (converting them into DAU's or daily active users). Google's AdMob can help developers' immensely in building an ad-supported app and in diversifying revenue streams beyond paid subscriptions or in-app upgrades and purchases.

Picking the right in-app ad platform

There are many options to chose from when picking an ad monetization platform. In fact, there are over 50 ad networks that app developers can choose from, or they can even build their own ad serving mechanism within the app to show 'house ads' - the ability to cross promote other apps or services of yours.

Or one can also sell ad inventory (such as a masthead, a branded product placed within an app, or branded power-ups in games, etc.) through direct sales teams. However, building one's own ad suite or depending largely on direct ads is not scalable, and warrants too much time and effort of developers and ad sales team alike to make this work profitably. This is where AdMob makes its biggest contribution in making life easy for both iOS and Android developers.

AdMob has a built-in mechanism that lets developers show 'house ads' to cross promote their portfolio of other apps for free. AdMob can also power your direct deals, which lets you run your own directly-negotiated ad deals with advertisers.

Another exciting feature of AdMob is 'mediation'. Mediation is a technology which helps apps to maximize the number of ads shown in an app, and thus helps increase revenue. Through AdMob mediation, one can integrate nearly 40 different mobile ads networks and even engage in SDK-less mediation for a select set of networks. With mediation, apps can enjoy the benefit of dynamic bidding and direct integration with other ad networks, which allows automatic CPM updates. This eliminates time and effort taken to manually adjust bidding floors. In terms of in-app monetization, AdMob is one handy tool that has all you need to survive - and thrive.

Watch out for the Part 2 in this series where we will discuss optimizing and measuring app monetization. Google has made a lot of resources available on AdMob (you can click here) and if you are a developer with apps that has over 100,000 downloads you can request a free consultation (you can click here).

Optimising revenue and volume

A counter question I often get goes like this, "But other networks offer better eCPM (more dollar for every one thousand impressions served), why must I choose AdMob?" Answer for this lies in understanding two metrics and the two respective fundamentals behind each of these metrics.

The first metric is 'fill rate' which means how many relevant ads can the ad network fulfill as requested by your app? A simple demand-supply equation is the fundamental behind this metric, because there are a lot of advertisers on Google, nearly 1million plus advertisers who want to show their ads (demand) to a potential audience who could be using your app (supply). This equation generates a very high amount of 'ad requests' of 200 billion per month, globally. With AdMob on your app, you can join the supply side.

The second metric of eCPM is how much money per thousand impression your app can earn? eCPM differs from network to network, however, a simple multiplication of eCPM with fill rate answers this question. If network A offers $1 at a fill rate of 85% then you get 85 cents revenue per thousand ad request (aka RPM). Now if network B offers twice as much at $2 but with a lower fill rate of 30% then you only get 60 cents of RPM. That's a 25% loss on potential earnings.

Choosing the type of ads to show

There a few standard types of ads, namely Banners, Interstitials, Rewarded, and Native. There's no fixed formula for which type of banner to use, but one principle developers must strongly adhere to is to 'preserve user experience' by integrating ads as unobtrusively and as natively as possible.

Game developers have an advantage in using rewarded ads, this a form of interstitial ad units that enables you to reward users with in-app items such as an extra life, a level jump, a feature unlock, etc., for watching video ads.

Native ads is a boon for publishers and content based apps. It is a component based ad format that matches the look and feel of the app where the ad is being displayed. This makes the ads look like they are a part of the app and reduces obtrusiveness. A simple example of this is a promoted tweet on Twitter or a promoted post on Facebook. It is essentially a tweet or post like any other, but an identified sponsor has paid to promote it.

Banners and interstitials are pretty standard formats. Apps can choose to display banners at fixed positions on screen like the top or bottom. The full-screen ads are called interstitials, these are displayed at natural transition points in the user journey such as between two levels in a game, between two news articles, etc.

Stop guessing and start testing

App developers often suffer from the curse of knowledge, that is, they assume their users know and use the app the way it was meant to be. But more often than not, this is not true and building the app's advertising strategy on gut feel is bad for business. Optimal monetization happens when users' journey from acquisition to retention is deeply understood. Thanks to the integration of Google Firebase with AdMob, app developers can use Firebase's free & unlimited analytics solution for deploying intelligent ad monetization strategies.

Importing Firebase SDK into apps requires no complicated coding. Once integrated, developers can get details like sessions, demographics of users, revenue from in-app purchases, etc., from Firebase Analytics. Besides this, AdMob's own reports will give you a ringside view on how revenue is generated.

To optimize monetization, it is imperative developers inculcate a habit of continuous testing and tweaking their product strategy based on data and hard insights.

In conclusion, ads are above fifty percent of total revenue generated by apps. According to data point by App Annie and IDC, in-app ads are projected to grow at 3.2X in next two years. As stated by Gartner, this year, over 268 billion apps are expected to be downloaded worldwide; apps have no boundary and you never know audience from which country maybe your biggest fans.

Google has made a lot of resources available on AdMob (you can click here) and if you are a developer with apps that has over 100,000 downloads you can request a free consultation (you can click here). Both the resources are free of cost. Godspeed and love to see India rise up in charts for generating app revenue.